Toughest time in 50 years of manufacturing
John Maisey can't remember an economic downturn this harsh on manufacturers.
That's saying something – he's been in the game at Hamilton's Forlong & Maisey for around 50 years.
Just as the managing director of the metal and plastics engineering company was this week lamenting the number of business casualties among his customers and sector players, the latest BNZ-Business Performance of Manufacturing Index landed, confirming the worst.
It reports manufacturing activity has dropped back into contraction after four months of expansion. The seasonally adjusted index for April was 48.0 – a reading above 50 indicates general expansion, below that it is declining.
As the provider of more than 320 jobs in New Zealand and Australia, Maisey, like other Kiwi manufacturers, has a lot on his plate right now as Asian engineering shops continue to grind out products at volumes and prices New Zealand just cannot compete with.
"It's hopeless. We can't compete and never will be able to until we get some changes in our wage structure or they do," says Maisey, who with wife Robyn owns the 66-year-old company in the Pukete industrial estate.
His dad Bob founded the company with Charlie Forlong in 1946 and John Maisey polished car bumpers for a Christmas holiday job there after doing a farming course at the city's polytechnic, and never left.
He says parts of the business are doing well – animal-health product exports and the plastics side, for example – but the downturn is the "toughest I can remember".
There have been other tough times but not for this long, he says.
"Two or three big customers have just disappeared. One of our divisions lost 40 per cent of its customers. Some engineering businesses are falling over – just disappearing."
Engineering companies pay the same price for raw material in New Zealand as for a finished product made in China and delivered to Hamilton, he says.
"That's why businesses are failing."
But he says Forlong & Maisey, which provides metal and plastics processing services to the automotive and dairy industries, has a shelving business in Australia and specialises in instrument supplies, is fortunate in that it does not have to compete with Asian companies on volume.
It makes hi-tech products in comparatively small volumes which means it can niche market. Only four or five jobs have had to be axed in the past 12 months.
Though the New Zealand dollar has waned this week, its enduring strength is also bashing manufacturers but Maisey says it's not realistic for New Zealand to fix its currency.
He predicts the detrimental Asian impact on New Zealand manufacturing will continue for another 10 to 15 years, likening the phenomenon to that after World War II when Japan flooded the world with cheap products. Japanese goods are now too expensive for many of us to afford, he says.
The skills shortage in the engineering sector is also biting, as the Waikato loses skills to Taranaki's buoyant oil and gas sector.
Maisey says he's just "telling it like it is" in manufacturing-land. But he is strategising too.
"You've just got to knuckle down and survive."
The company will in future be dealing directly with the end user of its products, instead of distributors. This has a disadvantage in that distributors tend to buy hundreds of products, while the end customer takes only one or two, he says.
It is diversifying within its plastics and elite polymers businesses, and investing in more extruders. Forlong & Maisey has the only tube extruder in Waikato, he says.
It used to buy in extruded tubes from Auckland, but decided it could make them better in Hamilton and now sells tubes to other businesses.
The company will also focus more on animal health and associated products.
"There's a growth market in that and in the specialised area. We will diversify into different products and the medical side."
Forlong & Maisey's annual revenue is "holding steady" at more than $30million, Maisey says, though he offers that growth has "gone back a bit".
One of his great pleasures is the four or so visits he makes each year to the company's Wilden Station, a 2400-hectare beef and sheep farm and bed-and-breakfast operation in west Otago. The couple have owned it about 12 years – they bought it with cash from a business sale in Thailand, fulfilling John Maisey's long ambition to own a farm.
He has a daughter and son-in-law in the business and let's on there's "a bit of succession planning" right now.
John Maisey's five-year business plan is to be fishing by 2017.